This might be the best protection if Britain leaves the EU

As we get closer and closer to the EU
referendum vote, analysts and investors are starting to pay
attention to what a "Brexit" could mean for the markets.

But while many are focused on the euro and the British
pound, a team at HSBC thinks that those trying to protect
themselves against a Brexit would be wise to check
out another currency: the Swiss franc.

"Being long the CHF may be the best hedge against
'Brexit,'" the HSBC FX Strategy team led by David Bloom
wrote in a recent research report to clients.

"If 'Brexit' is rejected then the CHF is unlikely to weaken much
as little political risk seems to be priced into the currency.
If, by contrast, the UK votes to leave the EU, then the CHF would
enjoy a sizeable safe-haven bid amid the scramble out of GBP and
EUR," the team argued.

"This asymmetry makes the CHF the
best choice as a hedge," they
explain. "It would capitalise on
'Brexit'but not suffer should Britain
choose to remain in the EU."

Some investors may be tempted to sell the
British pound as a hedge instead. However, the HSBC team
cautions against this because if the Brexit were rejected, then
the pound would likely rally strongly.

Notably, the team concedes that the Swiss National
Bank might intervene. However, theybelieve that ultimately a sustained
intervention would be too costly.

In short, a "'Brexit' may never happen, but CHF is the
appropriate FX insurance just in case."

Notably, the latest polls from the UK show suggest that the
Brexit vote could be a close call.

The
ORB poll for the Telegraph found last week that 51% of
voters now support the Remain campaign, while 44% support
Leave. However, 70% of Leave voters said they will go to the
polling booth, while just 61% of remain supports said they would.